Intellectual capital and organizational knowledge must be captured and not made available to the rest of the organization to be worthwhile
What is Intellectual Capital? It is both organizational knowledge and industry knowledge. It’s the ability to apply skills to complex situations, it’s the cognitive knowledge through training and experience, it’s the system understanding of cause and effects, it’s knowing how the business runs, it’s knowing how to avoid the minefields, it’s the knowledge of how to find information; who knows it and where to get it.
It has been said that the power is not knowing all things but knowing where to find the information. Intellectual capital is an organizational asset along with inventory and accounts receivable. The accounting community does not show this asset on a company’s books but it may be part of the “goodwill” entry when a company is acquired.
Preserving Intellectual Capital
One problem in many organizations is employee attrition; employees retire, resign, transfer to another department, or take a job with the competition. Average employee turnover rate is 14.4 percent per year, according to the Bureau of National Affairs. Employees have knowledge about their job, the business processes, the data that supports their job, how to make things happen, and what works and what does not. Unfortunately, they have no means – or incentive – to share their knowledge. Their knowledge has not been captured, their knowledge has not been transferred or made available to others, and this knowledge is lost to the organization. Regulations including Sarbanes Oxley require documentation of workflows and procedures. Security and privacy rules and concerns including HIPAA, Basel, and the ever-present legal exposures require knowledge of how the organization is run. Global organizations have an even more demanding requirement given differences in language, accents, culture, time zones, and communication challenges.
HR directors are concerned with employee turnover; “it costs a company one-third of a new hire’s annual salary to replace an employee,” according to many studies. Therefore, HR directors have been tasked to preserve the intellectual capital of their organization and corporate officers are bound to preserve the assets of the organization. Intellectual capital is such an asset. The challenge is to capture and leverage the knowledge, to expose it to the rest of the organization by providing a knowledge base that is easily searched. The solution is to capture knowledge from key employees, to store and organize the knowledge, and make it available to new hires or transfers as part of training, to existing employees, and to share knowledge with employees in other departments.
Intellectual capital can be captured in metadata which would include business definitions, valid values (domains), business rules, data ownership, data sources, data lineage, security and privacy, and data timeliness. Since intellectual capital goes beyond classical metadata, it is important to capture organizational history, stories of success and failures, post-mortems, case studies, and corporate culture. This process expands the notion of the types of information that can be captured in metadata. Intellectual capital can be captured in a data modeling tool, with user defined parameters, definitions, and notes. Intellectual capital could also be captured in a variety of metadata tools.
The types of knowledge that would be relevant are data definitions, business processes, business rules, technical knowledge, culture of the organization, management styles, culture of the industry, history with customers, suppliers, and partners, and how data flows through the organization. Business metadata includes how customer leads become sales, how the sales become orders, how orders generate invoices, how invoices are paid and how payments become revenue: in short, the Information Supply Chain.
The capture process would include structured interviews specific to each department and specific to the types of knowledge the sponsoring manager would deem important. The results of the interviews would be validated for accuracy and usability. A capture mechanism would employ the capabilities of the data modeling tool or the metadata tool. The knowledge repository must be organized to make it useful and accessible. Employees accessing the knowledge base must be able to use a search with appropriate keywords. Other enabling technology can help with both capture and dissemination such as wikis, portals, threaded conversations, etc.
Socialization of Knowledge
Knowledge is built from other knowledge; it is cumulative. One thought or idea is built from preceding thoughts or ideas. The internet and computing technology offers many vehicles for the socialization of knowledge:
- Groupware and collaborative software
- Threaded conversations
- Email lists
- Online chats
- Social networking
- Concept maps (C-Maps) and mind maps
For example, a wiki can be used as an online encyclopedia; it can be authored by anyone and everyone. Anyone can edit someone else’s entry, therefore allowing knowledge to evolve and build on prior knowledge. People have a sense of ownership that they are contributing personally to the corporate knowledge base.
Beware, however; most wikis are “roach motels.” Just like the song “Hotel California,” “…you can check in any time you like/ but you can never leave…” Data may be entered, but repurposing it or importing it to another application or use is not possible. This can be roadblock when deciding to use a wiki. In many respects, wikis make great corporate business glossaries, but because they cannot use the data for another purpose, the dictionary cannot be invoked in other applications like a BI tool. The lack of connection with wikis and other applications hinder a user’s ability to understand the data fully when making business decisions.
The Role of Data Governance
Data governance often is focused on data transactions. Transactions are the lifeblood of the company and therefore must be strictly regulated. Bad data should not be entered into the system because it could seriously corrupt corporate data, reporting, decision making and affect results.
However, the corporate knowledge base is fluid and must respond to the ebb and flow of knowledge throughout the enterprise. As a foundation of knowledge is laid, it must be serving as the basis for additional knowledge acquisition and use.
Most intellectual capital resides in peoples’ heads, and one of the objectives of knowledge capture is to reach out and encourage people to share. Too much proactive data governance will discourage people from sharing their information. Too many constraints upon entering information will make sharing too difficult.
Pilot for Intellectual Capital Development
A pilot would focus on an individual department such as Marketing, Finance, HR, etc. The purpose of the pilot would be to evaluate the usefulness of this initiative, to learn from its successes and failures, and to provide a template for the capture and dissemination of knowledge in other departments. The pilot would need a strong sponsor and a full-time team of two to four people, with the participation and sponsorship of the Chief Data Officer. The department employees must support the pilot but not everyone in the department needs to participate and those who are reluctant should be able to opt out. The pilot project should be evaluated for the value it provides. The primary determinant would be the level of access to the knowledge repository. The knowledge repository must be maintained and current for it to remain valuable, meaning ongoing responsibility for its care and usage.
This is an example of a pilot that could be instituted in the HR Department. Each of the following areas is ripe for the knowledge that could be captured:
- Employee and labor relations
- Employment regulations, state and federal compliance requirements
- HR policies and procedures
- Health, safety, and security issues
- Staffing: job analysis; succession planning, the changing and aging workforce
- HR development: training, employee development, management development, leadership development, performance evaluation systems and policies
- Compensation and employee benefits, incentives and reward structures
- Cultural changes
The value to the organization of a knowledge repository is almost incalculable. Consider the collaboration and communication opportunities and peer relationships that could be established. The knowledge repository could be a resource database for various communities of interest. The opportunities for problem solving and interactive sharing are apparent. The knowledge repository could be used for training new employees or employees new to a department, and would be a ready reference when there are problems to be solved. The knowledge repository would house lessons learned on projects from post-implementation reviews, with the creation of organizational best practices. Capturing intellectual capital and the resulting organizational insights could become core and important functions of HR Management. Metrics will be useful to indicate usage, and to allow management to understand the value of the knowledge repository.
Problems with Intellectual Capital Initiatives
This initiative may have acceptance problems which management must know. Some employees will be reluctant to share their knowledge, since knowledge is a form of power, representing importance and respect which can affect an employee’s continued employment. Some reluctance can be overcome by making sharing part of the employee’s performance plans and performance reviews as well as public praise, acknowledgement, and listing author as the contributor.
With common and significant incentives, individuals are more likely to share as they realize that “When you share, we are all smarter.” There will always be some employees who will never share, and there are those who are confident enough of their place in the organization that they would readily share. Teams that work well together will be more willing to share, certainly with each other and possibly with the rest of the organization. Another place to start would be employees who would be retiring soon and selected retired employees could be brought back for their knowledge. In addition, there may be security issues and possible legal restrictions.
Certain parts of the knowledge repository would have security restrictions and an organization might expose itself to litigation based on the knowledge repository if, for example, a hiring best practice discriminated based on race or gender. If an employee believes that sharing could facilitate outsourcing his or her job to another country, no meaningful capture is possible and the employee will not participate.
Intellectual capital and the knowledge repository can have a dramatic impact on any organization. However, it will only be funded and supported if management recognizes the value of their employee’s knowledge; it will only work with appropriate incentives and an honest orientation on how it will be used.